Why AMD Won’t Be Splitting Up Anytime Soon
At least one report says AMD is entertaining the idea of spinning of its graphics business. But doing so would be 180 degrees counter to its longterm strategy.
There is a reason Advanced Micro Devices Inc. (AMD) issued an unusually prompt and forceful denial when a recent report claimed it had engaged a consulting firm to help explore options for breaking up the company. Simply put, considering such a move would run 180 degrees counter to the actual AMD strategy that executives just laid out to the financial community at the company’s analyst day a little more than a month before.
A June 19 report by the Reuters news service said AMD was at the initial stage of reviewing whether to split up the company and that AMD had engaged a consulting firm to help it review such options. Some speculated that the AMD was considering spinning off its graphics chip business.
Frequently, reports about boardroom level deliberations on drastic moves solicit a “no comment” from the company involved, or some boilerplate corporate speak about that company’s policy to not comment on rumor or speculation. But AMD responded quickly and definitively, saying through a spokesperson that the company had not hired a an outside agency to explore breaking up the company and that AMD was committed to the long-term strategy it laid out for analysts in May.
That strategy is essentially to grow in markets outside the traditional PC, where the bulk of AMD’s revenue has always come from. The company is looking toward gaming, where it’s had success; datacenters, where it currently derives less than $300 million in annual revenue; and what AMD executives call “immersive platforms”—basically devices that connect to the Internet of Things (IoT) as opposed to the data collection sensors that sit at IoT endpoints.
AMD has made significant progress in non-PC markets over the past few years. In 2012, 90% of AMD’s revenue came from the company’s computing and graphics segment. By last year, that number was down to roughly 60%, with the remaining 40% coming from the enterprise, embedded and semi-custom products segment.